Congress amended the Communications Decency Act (CDA) in 1996 in an effort to stop minors from viewing sexually explicit material. Though this was the main goal of the act, Section 230 has perhaps had a greater impact on social media than the portion aimed at protecting children. Section 230 gives limited federal immunity to “providers and users of interactive computer services.” This means that most social media publishers, such as Facebook, have immunity from civil liability based on the third-party content it posts.

This wide-ranging protection, however, has some limits. In a June 4 case decided by the Ninth Circuit Court of Appeals, the justices ruled that Meta Platforms (Meta), the world’s largest social media company and the publisher of Facebook, could be held liable for breach of contract for failing to moderate fraudulent ads placed by third parties. Meta’s claim of Internet publisher immunity, based on CDA’s immunity language, does not apply because its duty to moderate comes from contractual promises, not from its immune status as publisher.

This case began when plaintiff Anastasia Groschen claimed she was harmed by a fraudulent ad for toddler toys that did not resemble what was advertised on Facebook, and when co-plaintiff Christopher Calise purchased a car engine assembly kit that was never delivered. Both tried, but failed, to get refunds, which they claim violated Meta’s Terms of Service. They sued Meta for negligence, breach of contract, breach of the covenant of good faith and fair dealing, violation of California’s Unfair Competition Law (UCL), and unjust enrichment, seeking damages and injunctive relief. Senior District Judge Jeffrey S. White of the Northern District of California dismissed their claims, and the plaintiffs appealed.

Meta claimed on appeal that § 230(c) (1) prevents their liability. According to Circuit Justice Ryan D. Nelson who authored the Ninth Circuit opinion, the U.S. has “never delineated the scope of § 230(c) (1) immunity,” leaving district courts to struggle to define the limits of immunity as they apply to both contract and non-contract asserted claims. In consequence, he wrote, “We clarify it today.”

Justice Nelson’s opinion received a concurrence from Circuit Judge Jacqueline H. Nguyen and Senior Circuit Judge Eugene Siler of the Sixth Circuit, sitting by designation. Nelson began his ruling by stating that the non-contract claims asserted by Meta were properly barred by Judge White. However, he also ruled that White “applied the wrong legal standard in determining whether § 230(c) (1) bars Plaintiffs’ contract-related claims.” He concluded, “We therefore vacate the district court’s order and remand to apply the correct standard.” He summarized that “The threshold issue is whether or how much Meta enjoys immunity under § 230(c) (1).”

Next, Nelson provided the context by which Meta operates its social media platforms. He explained that Meta gets its revenue from advertisers, not from the users from whom it collects data. The social media company then sells ads for products that match users’ demographics. In essence, Meta’s software matches ads to “the right people.” But there is a problem. Nelson wrote, “…not all of Meta’s advertisers use the platform in good faith…and the ability to exploit Meta users has ‘revolutionized scamming.’” Meta says it tries to “curtail false or deceptive advertising,” and its Terms of Service promise to “…combat harmful conduct.” Plaintiffs argue that Meta is liable because it “materially contributes” to advertisers’ content.

Meta’s pledge to combat harmful conduct includes removing any “content that purposefully deceives, willfully misrepresents or otherwise defrauds or exploits others for money or property.” The plaintiffs argued that Meta was not doing as it claimed. Instead, Meta, they claimed, refuses to reject scammers because they, especially those from China who Meta regularly solicits, make the company money.

To answer the question of how much immunity § 230(c) (1) affords Meta, Nelson first acknowledged that Meta is “an interactive computer service provider” under the CDA. But was Meta also a “publisher or speaker” under § 230(c (1)? It was not. Nelson stated that Meta failed to meet its burden of showing that §230(c) (1) also applies to Plaintiffs’ contract-related claims, because those claims “do not seek to treat Meta as a publisher or speaker” but rather as only a distributor. Therefore, only Plaintiffs’ claims under their contracts with Meta, could proceed.

To support this distinction, Nelson wrote that § 230(c) (1) “precludes liability only if a defendant violates its duty as a publisher.” But if the “duty springs from another source – for example, a contract,” §230(c) (1), presumably its Terms of Service, does not apply. After discussing a line of precedents, Nelson summarized that “it is not enough that a claim, including its underlying facts, stems from third-party content for § 230 immunity to apply.” There must also be a duty.

To determine whether there is a duty requires application of a two-part analysis. First, what is the right that gives rise to the duty? If it springs from something other than the defendant’s status as publisher or a separate agreement, § 230(c) (1) does not apply. Second, the court examines what duty the defendant is required to perform. If the requirement is that the publisher must “monitor third-party content,” that is also barred by the same section.

Bringing these determinations to the facts of Plaintiffs’ case, Nelson says that Groschen and Calise have two claims: breach of contract and breach of the covenant of good faith, both based on Meta’s “enforceable promises” and “manifest intention to be legally obligated to do something.” The Ninth Circuit thus ruled that “… Meta’s duty arising from its promise to moderate third-party advertisements is unrelated to Meta’s publisher status, and § 230(c) (1) does not apply to Plaintiffs’ contract claims.”

Plaintiffs’ unjust enrichment, negligence and UCL claims all failed because of Meta’s § 230(c) (1) immunity. The opinion concludes by stating, “Plaintiffs’ contract claims are not barred by § 230(c) (1), but their non-contract claims are. We thus vacate the district court’s order as to the contract claims and remand for further proceedings.”